A Comprehensive Guide to State Retirement and Pension System
Generally, your retirement allowance will be paid monthly for as long as you live. The balance of your total cumulative deductions from your annuity reserve account will be given to your beneficiary of record who is still alive or, in the absence of an heir, to the person or individuals who, in the State Retirement Board’s opinion, are eligible, along with any other beneficiaries who are listed on your beneficiary records.
Definitions
The state retirement and pension system is a pension and savings plan that provides benefits to employees of the Commonwealth. Nearly all permanent or part-time regular state employees must be system members. Until you retire, are not re-elected or appointed, resign from your job or office, or receive a termination allowance, you are still considered a member-in-service of the Commonwealth.
You earn a retirement allowance, depending on the option you select, consisting of an annuity savings account and a pension. During the first two years of retirement, your assistance includes a fixed monthly income and common interest earned on your prior year’s ending balance.
You can request a refund of your accumulated deductions when you leave state service. Your accumulated deductions are considered income and may be subject to attachment or garnishment under state law. The State Retirement Board is a five-member, nonpartisan public authority that regulates and approves pension applications, ordinary and disability retirements, service purchases, and refunds for all state employees.
Benefits
The state retirement and pension system administers survivor, disability, and retirement benefits for 778,000 employees, including teachers, state agency and public college and university personnel, state police officers, and Virginia law officers. It also serves political subdivisions that join the System and their employees. The System is the world’s 14th-largest public or private pension fund.
During the early 20th century, workers in industries such as railroads, mining, metal trades and manufacturing were left without income at retirement because they needed private pension plans. When the federal government set up Old Age Assistance (OAA) to subsidize State old-age pension programs, many States developed their programs.
This was the first time State and local governments began offering a fixed retirement benefit. Using improved actuarial calculations, this model helped ensure that benefits could be paid throughout the member’s lifetime.
Qualifications
Your retirement eligibility is based on your years of service credit, age, and final average salary (FAS). Your FAS includes wages earned in the 36 consecutive months of highest earnings. This period may include overtime, non-compensatory overtime and longevity payments.
If you are a member of the Teacher, State Employee, Judicial or Old State Police Pension Plans, you are vested when you have completed ten years of earned service credit. In addition to accumulated contributions, your FAS will include your earnings on non-reimbursed expenses and certain types of special pay.
Our disability benefits provide important financial protection if a permanent injury or illness prevents you from performing your job duties.
We administer the state’s pension and health care benefit plans, including overseeing regulations; educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law.
Taxes
Pensions are employer-sponsored income streams that are usually funded with pre-tax dollars. This makes them partially taxable. However, you don’t pay taxes on the portion of your retirement allowance that represents a return on the after-tax amount you paid.
Your group classification determines the amount of your retirement benefit. It’s based on your position, occupation and duties. Your group classification is reviewed at the time of your retirement.
You can withdraw your accumulated retirement contributions if you leave state service before being vested. This includes the accrued interest you have earned on your donations. If you do this, you’ll have to pay federal taxes on the money you receive and will no longer be a member of the System. If you withdraw your accumulated contributions, you must complete a request for withdrawal of accumulated contributions packet. If you choose this option, we strongly recommend signing a special power of attorney document limiting the person who can act on your behalf to retirement benefits only.
Options
Whether you participate in a defined benefit or cash balance plan, when it’s time to retire, you have several options. Each Option has its own unique set of benefits and requirements.
With all retirement options, if you die at any point before your beneficiary (or beneficiaries) receive monthly payments that total your present value of the benefit, those monthly payments will stop. Some options offer a bounce-back feature that increases the monthly payment to a straight-life amount at your death or upon the predecease of your survivor(s).
Unlike traditionally defined benefit plans, cash balance plans invest employee and employer contributions in various investment fund choices, where the rates of return vary over time. You may view the current returns for each fund here.
